Avoiding Probate in Nevada and California with a Heggstad Petition

  • February 15, 2018

Avoiding Probate in Nevada and California with a Heggstad Petition.

The use of revocable inter vivos trusts, also known as living trusts have gained in popularity. A wide range of estate, tax and wealth planning objectives can be achieved by the use of living trusts.  A primary objective of the living trust is the avoidance of probate.

Problems can arise, however, when a trust is created but assets are not transferred into the trust, whether inadvertently or because of an ineffective transfer document.  When real estate assets are inadvertently not transferred to the trustee of the trust, it may still be possible to avoid a lengthy and expensive probate.

Under California law, a trust can be created by a written declaration by the owner that the real property in question is held subject to a trust, and no separate transfer by deed is required to fund the real property into the trust. (Estate of Heggstad (1993) 16 Cal. App. 4th 945.)  This ruling provides an opportunity to have a court declare real property to be subject to a trust through the filing of a petition that has become known as a “Heggstad petition”.  A successful Heggstad petition can allow the parties to avoid a more lengthy and costly probate proceeding.

Several provisions in the Nevada Revised Statutes (NRS) dating back to 1999 authorize a Heggstad-like petition in Nevada. The most recent addition to the NRS in this regard was enacted by the 2015 Nevada Legislature in Senate Bill 484, Section 64. The new amendment of NRS 164.015 confers additional explicit authority upon the Nevada District Courts in cases involving non-testamentary trusts to hear and act upon “petitions for a ruling that property not formally titled in the name of a trust or its trustee constitutes trust property…”

For more information on California or Nevada probate, and the possibility of avoiding probate, the attorneys at Incline Law Group, LLP may be able to assist.

IS YOUR INHERITED IRA PROTECTED FROM CREDITORS?

  • July 20, 2014

By John C. Rogers, Attorney, Incline Law Group

This question is important to those who receive an IRA as a beneficiary, but more important to those who plan to pass an IRA to children or other beneficiaries. The latter have the opportunity to plan so that the inherited IRA includes protection from creditors.

In a recent landmark decision, the U.S. Supreme Court held that an inherited IRA does not qualify for the “retirement funds” exemption under the bankruptcy code Clark v. Rameker, 573 U.S. ___ (2014).

In that case, IRA beneficiaries filed for Chapter 7 bankruptcy protection and claimed about $300,000 in an inherited individual IRA as exempt “retirement funds.” (See 11 U. S. C. Sec. 522(b)(3)(C).)

The court decided that funds in an inherited IRA were not “retirement funds” intended to be protected by the exemption.

The court pointed to three legal characteristics of inherited IRAs that clearly distinguished them from protected “retirement funds.” (1) Inherited IRAs can never be increased by contributions from the inheriting holder. (2) Holders of an inherited IRA must withdraw funds from the account no matter how far they are away from retirement. And finally, (3) the holder may withdraw the entire balance of the account at any time, for any purpose, without penalty.

The policies that allow original IRA holders to exempt “retirement funds” from the reach or creditors help assure that IRA funds will be available to fund necessities during retirement years. Because of the distinguishing characteristics described above, an inherited IRA operates in opposition to those policies.

If you are the holder of an IRA and you anticipate naming children or others as beneficiaries, and if you want to provide creditor protection for those beneficiaries, there are a number of mechanisms that may achieve this goal.

If you already hold an inherited IRA, you may want to consult with an attorney regarding the pros and cons of liquidating that IRA and investing in other protected assets.